Republicans in Congress are pushing for a new tax on U.S. universities as part of a bill that recently passed the House of Representatives by a narrow vote. This legislation, supported by President Donald Trump, aims to target what its backers describe as “woke” universities.
The House voted 215-214 on May 22, with the bill now moving to the Senate for consideration. It includes a proposal to increase taxes on university endowments, which are funds donated to schools to help sustain them financially. Currently, most universities have not faced taxes on these endowments for many years, thanks to a long-standing exemption for nonprofit educational institutions.
In 2017, a previous tax law introduced a 1.4% tax on universities with substantial endowments. This tax only applied to the wealthiest institutions. The new bill proposes a tiered tax structure. Schools with per-student endowments of over $500,000 but less than $750,000 would face a 1.4% tax. Those with endowments between $750,000 and $1,250,000 would see a 7% tax, while those with endowments exceeding $1,250,000 would be taxed at rates up to 21%.
This change could significantly impact many universities, especially the elite ones. For example, Harvard University, with a per-student endowment of over $2 million, would face the highest tax rate of 21%. Yale and Stanford would also fall into this category, while other institutions, like the University of Pennsylvania, would see their tax rates increase from 1.4% to 7%.
Supporters of the bill argue that it holds universities accountable for their financial practices and ensures they contribute to the economy. Jason Smith, chairman of the House Ways and Means Committee, stated that universities have long enjoyed favorable tax treatment while not adequately serving taxpayers’ interests.
However, the proposed tax has drawn criticism from university leaders. Yale’s president expressed that this legislation threatens the financial stability of institutions and could make college less affordable for students. Harvard’s president echoed similar concerns, highlighting the potential negative impact on financial aid and research funding.
As the bill heads to the Senate, its future remains uncertain. Some Republican senators have expressed concerns about its potential impact on the national deficit, which could complicate its passage. If approved, the bill could change how universities manage their endowments and their overall financial landscape.
In recent years, the Trump administration has taken a hard stance on higher education, often criticizing universities for their policies and responses to various social issues. This new tax proposal is seen as part of that broader agenda, targeting institutions that the administration views as out of touch with taxpayer interests.
The outcome of this legislation could reshape the funding and operation of many U.S. universities, especially those with large endowments, making it a significant development in the ongoing conversation about higher education in America.